What is Ren Protocol?
Ever thought why you couldn’t exchange your crypto assets without an intermediary? If yes, you are aware that blockchains lack interoperability. Ren Project or Ren Protocol provides an effective solution to this interoperability issue.
So, what is the Ren Protocol?
To put it simply, Ren Protocol is a decentralized platform establishing universal interoperability between different blockchains. Ren Project enables the permissionless and private transfer of value between different blockchains using RenVM (Ren Virtual Machine). Ren Protocol enhances various decentralized applications (DApp), including decentralized finance (DeFi) applications.
Ren Protocol is the first decentralized dark pool (no visible order book and trades are not publicly visible) in the blockchain world.
This post starts with a high-level overview of the Ren Protocol and gradually moves towards the technical know-how.
Let’s get started.
What are Dark Pools?
If you do not want malicious eyes on your trading activities or if you wish to trade anonymously, dark pools are made for you.
Dark pools are private exchanges where large trades are made anonymously. These trades are not visible to anyone. This becomes a boon while trading large securities.
But why do we need to understand it while discussing blockchains?
Blockchain is a public ledger where transactions are transparent. They are indeed secured from any identity theft, but to trade different crypto assets, you need centralized exchanges. This is because most blockchain networks aren’t interoperable.
Your inter-blockchain transactions become visible while you trade assets from different blockchains using exchanges.
What about decentralized exchanges?
They provide decentralization but do not have access to more liquid assets.
Ren Protocol puts an end to such issues by providing interoperability to blockchains, developers, and users.
What is Ren Protocol?
Ren Protocol is a decentralized platform providing access to inter-blockchain liquidity for all decentralized applications (DApps). It enables you to access various crypto tokens among different blockchains. All of these functionalities are powered by RenVM, a trustless, decentralized, and secure network of virtual computers.
Ren Protocol proved to be useful for various decentralized applications
It currently supports four major blockchain networks –
- Bitcoin (BTC)
- Bitcoin Cash (BCH)
- ZCash (ZEC)
- Ethereum (ERC20s)
The key highlights of the Ren Protocol are as follows –
- Universal Interoperability between blockchains – You can use RenVM to send any asset to any application on any blockchain network in large volumes
- Secure – Security is at the heart of the Ren Protocol. It has large bond deposits, large shard sizes, and continuously shuffles the nodes (darknodes) which participate in the RenVM. This ensures robust security and annihilates counterparty risk.
- Scalable – As the number of locked assets increases, RenVM automatically increases its capacity.
- User-first approach – You will enjoy a smooth experience as you can interact with multiple assets using one transaction.
REN is an ERC-20 token native to the Ren platform. Its total supply is capped at 1,000,000,000 REN tokens.
It has two major uses in the Ren Protocol ecosystem.
- Fees – Users have to pay fees using REN tokens. Darknodes are also incentivized with REN tokens for their contribution to the network.
- Bonds – Traders and participating nodes have to submit bonds in REN tokens to access the Ren Protocol ecosystem. This prevents bad actors from submitting faux orders.
The Components of Ren Protocol
Before diving into the functioning of the Ren Protocol, let’s understand its components.
What is RenVM?
RenVM is a network of computers (darknodes) that powers the decentralized interoperability of the Ren Protocol. Developers can also leverage RenVM to enhance their decentralized finance (DeFi) applications. Your DeFi application can skyrocket its growth by integrating RenVM’s cross-chain liquidity. You can easily plug RenVM into your DeFi application.
What are Darknodes?
Darknodes are machines that contribute their computing power and storage to the RenVM network.
To become a darknode, one has to stake 100,000 REN tokens (describe above). This deposit is deemed a commitment to good behavior. If darknodes try to act maliciously and cause harm to the network, a certain amount of token is slashed from their deposit. If any user is affected due to the malicious activity of the darknodes, they are compensated from the slashed deposits.
Darknodes are incentivized to keep the network functioning. They receive a percentage of the fee from users.
What are Shards?
As discussed earlier, Ren Protocol shuffles darknodes to prevent bad actors from attacking the system. RenVM is powered by hundreds of darknodes. These darknodes are randomly shuffled once per day into unpredictable, non-overlapping groups called shards.
Each shard contains at least one hundred darknodes. This makes it difficult for bad actors to launch Sybil attacks, as they would have to own a large portion of the entire network.
This every day shuffling of darknodes into various shards prevents rational as well as irrational adversaries.
As now you are aware of the Ren Protocol’s lingo, let’s dive into the functioning.
Different flavors of Cross-Chain Transactions
RenVM offers three kinds of cross-chain transactions. RenVM acts as a custodian that holds your assets, ties them to tokens. The assets are pegged into one-to-one token representations. These pegged tokens can be used on different platforms.
- Lock and Mint
Lock-and-mint transactions are transactions where users send an asset from one chain (origin chain) to another (host chain). Suppose you want to use your Bitcoins on the Ethereum platform. In this case, you would ‘lock’ your Bitcoins on the RenVM network and ‘mint’ the tokenized representation of the same amount (renBTC) on the Ethereum network.
- Burn and Release
Imagine you have now used some of your minted tokens on Ethereum, and now you want to transfer your tokens back into Bitcoin. This exchange of assets from the host chain to the origin chain is called a ‘burn-and-release’ transaction. You (or your smart contracts) have to ‘burn’ your pegged asset on the host blockchain. RenVM automatically senses the burning of the tokens and releases your asset (in this case, Bitcoin) to the specified address.
- Burn and Mint
What if you want to transfer your assets from one host chain to another host chain?
This flexibility is achieved using burn-and-mint transactions. Users or smart contracts burn the pegged asset on one host chain, and mint the same amount of tokens on the other host chain using RenVM. For example, sending Bitcoins from Ethereum to Polkadot can be done using a burn-and-mint transaction.
These three inter-blockchain transactions are executed in a decentralized and secure manner. RenVM uses the ‘Shamir’s secret’ principle to keep your transaction anonymous (even from RenVM). Your transactions are broken into different parts (secrets), and distributed across darknodes. In this way, no one knows about your transactions as these secrets are an unsolvable puzzle. The secrets cannot be joined to know your transaction.
RenVM is a Byzantine fault-tolerant (BFT). This implies that, if certain malicious darknodes try to fool the system and shut the network, they have to first reach a consensus. Thus, even if there are bad actors, the system remains fault-tolerant.
Ren Protocol reaches a consensus using secure multi-party computation where different parties jointly compute a function over their input.
In a Nutshell
Blockchains lack a major function of communicating with each other. Ren Project is a decentralized solution to the blockchain’s interoperability problem.
The Internet can be a suitable yet rudimentary analogy to understand Ren Project. Just like the internet establishes communication between different web pages using links, Ren Protocol establishes secure communication with different block-cahins using RenVM.
RenVM allows you to anonymously trade a large volume of assets. It also provides a gateway for developers to leverage the RenVM network for enhancing their decentralized finance (DeFi) applications.
Ren Protocol has planned to extend its support to other blockchains. Currently, it supports Bitcoin, Bitcoin Cash, Ethereum, and ZCash.